Tax & Compliance
QSBS Stacking: How to Multiply the §1202 Exclusion Across Trusts and Family Members
Collated by Aparna Devalla, CPA
Curated by Rubric Financial
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The Base Exclusion + Why Stacking Is Possible
- §1202 excludes up to $10M (or $15M for QSBS issued after July 4, 2025 per OBBBA) of gain from federal tax on the sale of Qualified Small Business Stock — PER TAXPAYER, PER COMPANY.
- Critical phrase: 'per taxpayer.' Each TAXPAYER who holds qualifying stock for the 5-year holding period is entitled to their own $10M/$15M exclusion. Spouses (filing jointly) share ONE exclusion, but children, parents, and properly-structured trusts each count as separate taxpayers.
- By transferring shares to additional taxpayers BEFORE the sale (and managing the holding period correctly), you can stack multiple exclusions and shelter $30M, $50M, even $100M+ from federal tax on a single exit.
- Math: founder owns $50M of QSBS pre-exit. Without stacking: $10M excluded, $40M taxed at 20% LTCG + 3.8% NIIT = ~$9.5M federal tax. With 4x stacking (founder + 3 non-grantor trusts each with their own $10M): full $40M sheltered, $0 federal. Net savings: ~$9.5M.
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